Ky. car dealers happy but wary

Despite money trouble with the "cash for clunkers" program, Paul Cleaver, president of Freedom Dodge Chrysler Jeep in Lexington, says it's good for business.

"The success of this program is really a positive sign, even if it makes problems," Cleaver said. "The auto industry has been really quiet, I think because of the credit and financing issues we've been having. This incentive at least got people moving back again."

Four Kentucky auto dealers interviewed Monday, including Cleaver, said they are concerned about the status of cash for clunkers but pleased with its results.

Under cash for clunkers, customers trade in cars that get 18 or fewer miles per gallon to buy a new, more fuel-efficient vehicle. The customer gets $3,500 or $4,500 off the price of the new car, and the dealer applies to the federal government for reimbursement of that money.

However, the $1 billion that was supposed to pay for the program is gone already, leaving some dealers unsure when or whether they will see the money.

As federal legislators debate whether to spend $2 billion more on cash for clunkers, Cleaver said it's "a leap of faith" to say that the reimbursements will be forthcoming.

"We're not going to cross that bridge yet," Cleaver said when asked what his dealership would do if the government reneged.

Cleaver noted the complexity of cash for clunkers transactions — each requires the dealer to submit "about 20 copies of different documents to the government," and "it takes a while for them to approve each transaction," — but he says it's worth it.

From June to July, "our sales increased 100 percent due to this program. It's really made it an unbelievably cheap price for a new car," Cleaver said.

Jack Kain, who represents Kentucky's franchised new-car dealers on the National Automobile Dealers Association board of directors and owns Jack Kain Ford in Versailles, said the cash for clunkers program has helped dealers all over Kentucky.

"Nothing happens in this country unless someone sells something. We're selling something and starting a chain reaction," he said. "It's bringing a lot of people into the dealership, and of course it will start creating new jobs in the industry."

Kain said he isn't worried he won't be reimbursed for the new cars he's sold, and for now, Jack Kain Ford will continue to participate in cash for clunkers.

"The U.S. Transportation Secretary Ray LaHood said the government will honor the rebates, and we're trusting his word," Kain said. "We have confirmed 11 trades and have 15 waiting to be confirmed. But the program is going to help our sales even more in August."

Wendell Zopsi, new car sales manager at Green's Toyota in Lexington, and Mike Griese, general sales manager at Dry Ridge Toyota in Grant County, also said they still favor cash for clunkers.

Their enthusiasm is not shared by some, including U.S. Senate Republican leader Mitch McConnell of Kentucky, who worry the program could prove to be a bottomless pit for taxpayers' money.

"Last week we saw the administration's tendency to miss the mark on economic estimates again with the so-called cash for clunkers program," McConnell said in a statement released by his office.

"We were told this program would last for several months. As it turned out, it ran out of money in a week, prompting the House to rush a $2 billion extension before anybody even had time to figure out what happened with the first billion."

Gyan Pradhan, chairman of the economics department at Eastern Kentucky University, has a more positive view.

"By every indication, I think the program has been a success," Pradhan said.

"It's following a basic rule we teach in economics 101: people do respond to incentives. If you create incentives and then allow the market to work relatively independently, as demand goes up, the results tend to be positive."

Pradhan said he thought there was a limit to the effect the cash for clunkers program could have on the economy, but the program would still be worth an additional $2 billion investment.

"The hope is that it provides a temporary boost, which lasts long enough for the economy to pick up," he said.

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